Category Archive : Stock Market

Characteristics of Investing

Investing has the following characteristics:-

1] Buy & Hold –

While money may be tight, young adults have a time advantage. Investing requires only two things: the reinvestment of earnings and time. The longer money is put to work, the more wealth it can generate in the future. Gradually build wealth over an extended period of time through buying and holding a portfolio of stocks and also mutual funds.

For example, if an investor had bought shares of HDFC Bank Limited stocks at its closing price of Rs. 213.49 per share on 11th July 2008, and held onto the stock until 6th July 2018, then the stock was worth Rs. 2,114.05 per share. The share price has been increased by almost 11 times.

2] Compounding –

Magic of Compounding Explained returns are extremely powerful over the long run, and the earlier you get started the greater your chance is to take advantage of this. Regular investments in an investment portfolio or a retirement account can lead to huge compounding benefits. Investors enhance their profits through compounding.

3] Long Term –

Investments start giving results after a period of time. Holding the investments for the long term is important. Some are in a hurry and sell their investments before it starts giving actual results. Investments made with long term perspective are always beneficial. Investments are held for years or even decades.

4] Focus –

While investing, minor fluctuations are ignored. These fluctuations have no real impact on the investments in the long run. Focusing on long term goals that are set and are to be achieved is important. Short term fluctuations do not deviate investors from their long term goals.

While investing, there are some factors that can be controlled and some that cannot be controlled. An investor should always focus on things that can be controlled. The markets cannot be predicted as there many factors affecting it simultaneously. And therefore, focusing on factors that can be controlled is crucial. While investing an investor should focus on three basic things that can be controlled, which are – what we buy, how much of it buy and at what price we buy.

 5] Fundamentals –

Investors don’t give much importance to information which is qualitative and not quantitative. Investing focuses on past as well as future (forecasts), but more importance should be given to future. Investors are more concerned about fundamentals such as PE ratio and management forecasts.

But this is wrong. Fundamental data is given in a standard format, so analysis made by anyone from this data would be the same. Results from standardized data are of use as they don’t reveal anything new or interesting. This means that for successful investing an investor needs to look for data or information which most people don’t see. People think that fundamentals provide a sense of security, which is exact opposite, i.e fundamentals are dangerous.

The image below shows data on where and how much do people in India invest their money.

Financial assets of the household
benefits or featurs of investing

Stock Market Participants

The Stock Market refers to the collection of markets and exchanges where the issuing and trading of equities or stocks of publicly held companies, bonds, and other classes of securities take place.

Following are the main participants of a stock market:-

Regulator –

A Regulator or regulatory authority amends and approves different laws, makes sure that no broker/company is indulged in fraudulent activities.

SEBI (Securities and Exchange Board of India) is basically a regulator of the Indian Stock Market. Also SEBI is known as India’s most strict and efficient regulatory body.

The Securities and Exchange Board of India is the regulator for the securities market in India. It was established in the year 1988 and given statutory powers on 30 January 1992 through the SEBI Act, 1992.

Brokers –

Stock brokers are licensed by the SEBI and are entitled to trade at the stock exchange. They act as the middlemen or agents between the sellers and the buyers of stocks in the stock market.

Brokers & dealers charge a fee to handle trades between the buyers and sellers of securities. A broker-dealer may buy securities from their customer who is selling or sell from their own inventory to its customer who is buying. Here are top 10 Brokers in India by number of clients in NSE –


Stock Exchanges –

A stock exchange is an organized marketplace or facility that brings buyers and sellers together and facilitates the sale and purchase of stocks.

Stock/Securities exchanges are markets where securities are bought and sold. It makes sure that trading transactions are done in an efficient, orderly, fair, and transparent manner. It enforces rules and regulations that its publicly listed companies and trading participants must strictly abide by.

Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been in existence since 1875. The NSE, on the other hand, was founded in 1992 and started trading in 1994. However, both exchanges follow the same trading mechanism, trading hours, settlement process, etc.

Investors –

Investors, also referred to as stockholders or shareholders, are those who own shares of stock of a publicly listed company. They are given certain privileges like the right to fair and equal treatment, the right to vote and exercise related rights, and the right to receive dividends and other benefits due to stockholders. They are classified as either retail or institutional, and domestic or foreign.

Investors are regular people who buy/sell shares of different companies. An investor is a person who buys shares and keeps them for long term (i.e. >1 year). A trader is the one who buys and keeps the shares for short term (i.e. <1 year). Normal people who invest in the stock markets are called Retail Investors, whereas when banks or big fund companies invest they are called Institutional Investors.

Stock Market Participants

New Market Cap Classification

In the revised circular (October 2017), SEBI prescribed that for mutual funds, the market capitalization for the previous six months would be considered.

Market capitalization is the basis for fund classification. As per the circular issued by SEBI, schemes were to follow the rules below:-

  • Large-cap oriented schemes should invest at least 80% of their assets in large cap stocks
  • Large-cap and mid-cap schemes shall have minimum allocation of 35% in each
  • Similarly, mid-cap schemes and small-cap schemes shall invest at least 65% in mid-cap and small-cap stocks respectively

And here’s how the market capitalization categories were defined:-

  • Large cap stocks are defined as the top 100 companies in terms of market capitalization.
  • Mid cap stocks are companies having rank between 101-250 in terms of market capitalization.
  • Small cap stocks are companies are from 251st onwards on full market capitalization basis.
Market Cap classification

Here is the list of Large Cap & Mid Cap Companies in India as per 30th June 2018 data. Rest all the companies fall under Small Cap space.


Why Mutual Funds & Not Direct Stocks?

We get this question very frequently that why do we suggest to invest in Mutual Funds when we can easily buy few good stocks ourselves or imitate any good fund manager’s portfolio and save the Mutual Fund costs.

Answer is just one word – Time.

If you have enough time to do stock research and to know which are ‘good’ stocks, when to buy and when to sell them, if you have time then yes, you can go for direct stocks.

If you don’t have time, then Mutual Funds are best because then there is a team which is full time doing this for you. You just have to find the right team once and they will keep making money for you.

And then there are few other benefits as well –

Why Mutual Funds & not Direct stocks?

Bandhan Bank IPO Details

Bandhan Bank IPO Details :

  • Price band: Rs 370 – Rs 375
  • IPO size: Rs 4,413 crore – Rs 4,473 crore
  • Subscription dates: 15 -19 March 2018
  • Post-IPO valuation: Rs 44,134 crore to Rs 44,730 crore
  • Net Profit (FY 17): Rs 1,112 crore
  • Return On Equity (FY 17): 28.6 %
  • CASA (Dec 31,2017): 33.2 %
  • Capital adequacy ratio (Dec 31,2017): 24.85 %
  • Total deposits ( Dec 31,2017) – Rs 25,293 crore
  • Loan Book (December 31,2017) : Rs 24,364 crore
  • Gross NPA (Non Performing Assets) – As of Dec 31,2017 its Gross NPA stands at 1.67 %
  • Net NPA – As of December 31,2017 its Net NPA stands at 0.8 %
  • Net interest income (FY17): Rs 2,403 crore
Bandhan Bank IPO details
Bandhan Bank IPO details
Strength of Bandhan Bank
Why to invest in Bandhan Bank

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